Journal of Real Estate Finance and Economics, 24:1/2, 119±142, 2002
# 2002 Kluwer Academic Publishers. Manufactured in The Netherlands.
Commercial Real Estate Return Performance:
A Cross-Country Analysis
DAVID C. LING
Department of Finance, Insurance, and Real Estate, Warrington College of Business, University of Florida,
Gainesville, FL 32611-7168
E-mail: firstname.lastname@example.org; email@example.com¯.edu
This paper investigates the return performance of publicly traded real estate companies. The analysis spans the
1984±1999 time period and includes return data on over 600 companies in 28 countries. The return data reveal a
substantial amount of variation in mean real estate returns and standard deviations across countries. Moreover,
standard Treynor ratios, which scale country excess returns by the estimated beta on the world wealth portfolio,
also reveal substantial variation across countries in excess real estate returns per unit of systematic risk. However,
when we estimate Jensen's alphas using both single and multifactor speci®cations, we detect little evidence of
abnormal, risk-adjusted returns at the country level. We do, however, ®nd evidence of a strong world-wide factor
in international real estate returns. Furthermore, even after controlling for the effects of world-wide systematic
risk, an orthogonalized country-speci®c factor is highly signi®cant. This suggests that real estate securities may
provide international diversi®cation opportunities.
Key Words: real estate return performance, risk-adjusted real estate returns, international real estate returns,
international asset pricing
A global real estate securities market has slowly developed over the last two decades. At
year-end 1999, the market value of publicly traded real estate companies was approaching
$400 billion. This public market provides a vehicle for investors to construct international
commercial real estate portfolios without the burden of acquiring, managing, and
disposing of direct property investments in far-away countries with unfamiliar legal,
political, and market structures.
However, to sustain and increase the ¯ow of investment
capital into the international real estate securities market, performance benchmarks and
relative performance measurement are vital. This paper investigates the return
performance of publicly traded real estate companies. The analysis spans the 1984±
1999 time period and includes return data on over 600 companies in 28 countries.
At the simplest level, performance analysis consists of comparing historical returns and
their variances. However, a key problem with this simple unconditional approach is that it
Author for Correspondence: David Ling, Andy Naranjo, Department of Finance, Insurance, and Real Estate,
Warrington College of Business, University of Florida, Gainesville, FL 32611-7168.